The Flexible Coefficient Multinomial Logit (FC-MNL) Model of Demand for Differentiated Products
Author | : Peter J. Davis |
Publisher | : |
Total Pages | : 58 |
Release | : 2013 |
ISBN-10 | : OCLC:1309063786 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book The Flexible Coefficient Multinomial Logit (FC-MNL) Model of Demand for Differentiated Products written by Peter J. Davis and published by . This book was released on 2013 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show FC-MNL is flexible in the sense of Diewert (1974), thus its parameters can be chosen to match a well-defined class of possible own- and cross-price elasticities of demand. In contrast to models such as Probit and Random Coefficient-MNL models, FC-MNL does not require estimation via simulation; it is fully analytic. Under well-defined and testable parameter restrictions, FC-MNL is shown to be an unexplored member of McFadden's class of Multivariate Extreme Value discrete-choice models. Therefore, FC-MNL is fully consistent with an underlying structural model of heterogeneous, utility-maximizing consumers. We provide a Monte-Carlo study to establish its properties and we illustrate the use by estimating the demand for new automobiles in Italy.